Lucid made an outstanding appearance when it went public via SPAC in 2021, with its stock price soaring as high as $57. However, things have flipped completely now, and LCID stock trades around $4 currently, and this is making investors wonder, “Is Lucid going out of business?’
Let us look at what happened exactly, the reason why Lucid’s stocks are crashing, and find out whether it is a wise thing to invest in this company right now.
Why Is Lucid Crashing?
There are three reasons particularly that was the reason why Lucid’s stock crashed:
Lower Production
The first reason for Lucid’s stock crash can be attributed to the fact that the company has been trimming its production target over the past few years.
Starting in February, the company reduced its production range from 12,000 vehicles to 14,000 for the year 2022. Then, in August, it halved the target to just 6,000-7,000 vehicles.
The company blamed this slowdown in production on supply chain bottlenecks and other component shortages.
Lucid is making Losses.
Lucid is sinking in debt. The company’s net loss increased from $719 million in the year 2020 to $2.58 billion in 2021.
What looked like a good start in 2022 with a revenue of $350 million turned into a horror story when Lucid closed the year by incurring a net loss of $1.83 billion.
And even this year, in 2023, Lucid incurred yet another loss of $1.5 billion.
Rising Interest Rates
Lastly, the rising rate of interest, along with other related factors, are driving investors away from stocks that are showing speculative growth.
Additionally, Lucid’s poor balance sheet and decreasing production rates are a few factors that make it an unappealing stock for investors.
Will Lucid’s Stock Rise Up?
If we compare Lucid with other SPAC-backed EV makers such as Nikola or Canoo, then it is in a much better shape.
But in order for Lucid’s stock to rise up, it will have to ramp up its production, prove its business model and minimize its losses.
As of now, it is best to steer clear of Lucid and maybe invest in Tesla instead.
Is Lucid Going Out Of Business 2023?
To answer your most heated question- “Is Lucid going out of business?” Well, it’s hard to say if Lucid is going out of business right now, as this depends on multiple factors such as demand for their vehicles, their ability to meet the production, competition from other companies, etc
Since the Saudi PIF has a majority stake in Lucid, it’s highly doubtful that the Saudi government will lose its entire investment just like that. The Saudi PIF might take Lucid Motors at $5 rather than let the company go bankrupt.
Will Lucid Survive Or Go Bankrupt?
Sherry House, the CFO of Lucid, stated during the Q2 2023 earnings call that their company, Lucid motors, has enough cash to survive till 2025, which will give them enough time to revive the company.
However, Lucid made a loss of $1.5 billion in 2023, and so far, it has only been burning its cash to fund production growth.
Lucid Annual Net Losses (Per Share)
| Year | Net Loss |
|---|---|
| 2023 | $1.5 billion (-0.82) |
| 2022 | $1.3 billion (-$0.48) |
| 2021 | $4.7 billion (-$6.48) |
Lucid’s Cash Flow Problem
Free cash flow is a very important part of any business as it shows how much money the company keeps over time. As for Lucid, free cash flow is a big problem. The company closed the year 2022 with a negative FCF of $3.3 billion.
Lucid’s Cash Flow on Balance Sheet:
| Year | Cash Flow |
|---|---|
| 2023 | $5.5 billion (Quarter 2) |
| 2022 | $4.4 billion |
| 2021 | $6.4 billion |
Looking at the figures, it is clear that Lucid is burning its cash flow and will probably keep diluting shareholders to keep sailing. In order for Lucid to survive the current financial problems, the company needs to take care of its free cash flow.
The Future of Lucid
The future of Lucid looks bleak. With a reservation of 28,000 and a goal of producing 500k EVs annually by the end of 2025, we wonder how the company will fund this demand.
One way to do this is to raise prices, but that would drive some customers away. Another way to meet this demand is if Lucid tries to raise more funds from investors like Saudi PIF or if it offers more shares.
Wrap Up
Lucid Group is not profitable right now and hasn’t sold or delivered many vehicles in the past few years.
It would be a gamble to assume that the company would succeed in Saudi Arabia or would be able to turn its position by 2025.
Until and unless the company hits some shattering data points, it makes much more sense not to invest in this company for now.
We hope you found this article useful and got answers to your burning question on “Is Lucid Going Out Of Business?”
FAQs
Is Lucid Group going private?
Since Saudi PIF has a majority of stake in Lucid, it is highly doubtful that Lucid would go private. Once Lucid becomes profitable, however, the Suadi PIF might divest and sell its Lucid Stocks.
What will happend if Lucid goes out of business?
If Lucid goes out of business, it would have to file for Chapter 11 Bankruptcy to restructure the company and to cater to its debts. Additionally, if Lucid goes out of business, then NASDAQ will delist it from the stock market, and the investors would lose all their money.
Is Lucid in trouble?
In recent months, Lucid has been seeing a constant plummet in its stock prices, which tells the company is in great trouble and has only enough free cash to turn the table until 2023.